In case you’ve missed it, there’s quite row going on over the Department of Labor’s efforts to rewrite its definition of fiduciary advice for advisors to pension plans. Not only have the usual suspects such as SIFMA and FSI come out against it, even the Consumer Federation of America and the American Society for Pension Professionals and Actuaries have expressed reservations. And in a political environment where both side of the aisle in Congress can’t agree on what day it is, there’s even been a bipartisan call for the DOL to go back to the drawing board.
For financial advisors who work with qualified plans, the fate of the DOL’s rule changes has, of course, been on the front burner. But while events in the pension arena don’t affect the majority of advisors, the outcome of the ERISA battle will undoubtedly have implications for the looming debate over advisor reregulation under Dodd-Frank. For one thing, there have been calls from many quarters for coordinating the fiduciary standards under the DOL and the SEC (although, considering the glacial pace of the “underfunded” SEC, this could be as much a delaying tactic as a real concern). And of course, the same old objections by the same cast of characters have been cut and pasted into the DOL debate: the new regulations will increase costs, limit investor choice, reduce access to much needed financial advice, yada, yada, yada.
It’s very possible, though, that the most important takeaway from the current pension advisor debate is the difference between the DOL’s approach and how the SEC has handled its responsibilities to regulate investment advisors, both under Dodd-Frank and historically. If the DOL is successful in fending off its detractors and establishing a more consumer-oriented fiduciary standard, it may well provide a blueprint for successfully establishing an SRO for independent RIAs as an alternative to FINRA.